Will Agriculture Shine in 2020?
Two years away from the target date for doubling farmers’ incomes, food prices are rising but driven by supply-side glitches. How well is agriculture doing?
Photo Credit : Reuters
Simply put, 2019 was not a good year for agriculture, notwithstanding the robust summer crop. A part of the summer (Kharif) harvest was lost in unseasonal rains, pushing up prices of vegetables and pulses in the latter half of the year and then well into the new year. The farmer, who is staring at a calendar set for 2022 when farm incomes should double, was scarcely a beneficiary of the food inflation as plummeting exports of farm produce and rising imports of horticultural produce (yes, onions) indicate.
The silver lining to this cloud was the winter (Rabi) sowing, which was higher for many crops than in the 2018-19 financial year. Rice sowing, for instance, increased 16 per cent year-on-year, the acreage under pulses expanded by three per cent and sowing of coarse cereals was 13 per cent higher than in FY2019. Rabi cotton sowing was five per cent higher y-o-y, but oilseeds sowing fell short of the area covered in FY 2019. Sugarcane sowing showed a six per cent drop y-o-y. Even so, some experts like Emkay Global Financial Services (EGFS), a leading financial consultancy firm, are bullish on agriculture. “Such robust Rabi sowing is a result of a good monsoon and decade-high reservoir levels in most parts of the country,” says an EGFS report.
A Reliance Securities Agriculture Thematic Research report also pins its hopes on the Rabi crop. The report suggests that while the post-monsoon rainfall did impact the Kharif yield, it also resulted in a significant improvement in reservoir storage levels at the onset of Rabi 2019-20. Maharashtra witnessed a 79 per cent increase in the reservoir level y-o-y prior to this season. The water storage level stood at 97 per cent of the total capacity of the reservoir, compared to 65 per cent at the same time last year.
Farmers are consequently optimistic about the Rabi harvest and sowing can consequently be expected to rise significantly over that of FY 2019. Government estimates project a conservative 2.8 per cent to 2.9 per cent growth in agricultural production in FY2021 over the last year. Kavita Chako, Senior Economist at CARE Ratings, concurs with the estimates.
A Roller Coaster Ride
Data compiled over the past few years, however, point to a roller coaster ride for the agriculture sector. A recent PRS Legislative Research report on the state of agriculture in India shows rapid fluctuations in agricultural production over the past few years. Farm production was a negative (-) 0.2 per cent in 2014-15, before rising by 6.3 per cent in 2016-17, only to decline to 2.9 per cent in 2018-19. Gross fixed capital formation in agriculture decelerated from 17.7 per cent in FY14 to 15.2 per cent in FY18.
There has been a decline in the agriculture sector’s contribution to the Gross Value Added (GVA) from 15 per cent in FY16 to 14.4 per cent in FY19. The decline was mainly because of a decrease in the share of the GVA of crops from 9.2 per cent in 2015-16 to 8.7 per cent in 2017-18. But as Rajnikant D. Shroff, Chairman, UPL (formerly United Phosphorus Limited), points out laconically, agriculture’s declining share of the GVA had more to do with the shine in manufacturing and services like information technology (IT). “I feel that the agriculture sector’s total volume is going to increase – but by how much in percentage terms, will depend on how fast the other industries perform,” says he.
Shroff is optimistic about agriculture, but points out that the “share of agriculture in GDP depends on weather conditions”. Shroff expects positive growth in agriculture in 2020 and beyond. However, there are many contrarians too. Abhijit Sen, a one-time member of what used to be the Planning Commission of India and an economist with considerable work on agriculture, does not see a “very hopeful situation”.
Sen’s estimates for growth in the farm sector in 2020 are even lower than the modest numbers put out by the government. He expects farm output to increase by no more than two per cent to 2.5 per cent. “Inflation may help in relaxing some regions, but overall prices are set to go higher for the year to come,” says Sen.
Ramesh Chand, Member, NITI Ayog, though strongly believes that agriculture will record a growth of four per cent during 2020-2021. “It is required to support other sectors and their respective growth and it may lead to achieving the target of the $5 trillion economy mission by 2024,” says Chand.
His optimism is shared by agri input industries. Ankur Aggarwal, Managing Director, Crystal Crop Protection, says “It is expected that greater expenditure by the government will put more money in farmers’ hands. These various pro-farmer schemes will encourage farmers to invest more in the field, which will further improve productivity and farm production.”
Agriculture policy expert Vijay Sardana anticipates higher prices for commodities in 2020, even though he does not expect the benefits to flow to farmers in the way of remunerative prices.
The Doubling Farmers’ Income (DFI) Committee has set a target of 2022 for achieving the goal. “Pesticide Management Bill, clubbed with the Make in India push will bring superior products at reasonable prices to the farmers,” says Ankur Aggarwal.“The Seed Amendment Bill is also likely to come soon, which will help regulate the seed business more effectively,” he says, demonstrating his confidence in the policy measures planned for agriculture.
Ashok Dalwai, Chairman of the Empowered Committee for Doubling Farmers’ Income says, “The Year 2020 will sees creation of the first lot of Gramin Agriculture Markets during 2020, progress on E-Warehouse Receipt System and greater flow of institutional credit to Kisan Credit Cards, the benefits of which will be extended to segments like animal husbandry and fisheries.”
Rajmanohar Somasundaram, Founder and CEO, Aquaconnect, Asia’s pioneer full-stack aquaculture technology company, says prospects of the precision aquaculture sector were bright too. “It can really be a game-changer for the vision of doubling farmers’ incomes with the allied trades,” says Somasundaram. The precision aquaculture technology market was estimated at $400 million in 2019 and is expected to be worth $764 million by 2024, growing at a CAGR of 14 per cent between 2019 and 2024. It should be pointed out here that one out of four aquaculture farmers in India loses their crops to disease outbreaks. Technology intervention will, therefore, not only improve agricultural production but help manage risks as well.
Experts say that in 2020 milk production may remain constant, but prices may go up. Pushpendra Singh, President, Kisan Shakti Sangh, anticipates prices of sugarcane and milk to go up, not so much owing to a rise in consumption as poor coordination among provincial and central administrations. Ashok Dalwai, however, looks forward to a ‘One-nation, one-market’ environment in the year ahead. “In addition to the growth of agricultural production and farmers’ income, the focus can be expected to shift towards correcting today’s regional and commodity imbalances,” he says confidently.
Farm Export Policy
Policymakers, however, are not just working toward self-sufficiency, but looking beyond it, to develop an export market for agricultural produce. The Union Ministry of Commerce and Industry plans to introduce an ‘Agriculture Export Policy’ that aims to double agricultural exports, linking Indian farmers to the global value chain.
In FY19, exports of agricultural and processed food products totalled $38.49 billion. The top five exported commodities were marine products ($6.80 billion), Basmati rice ($4.71 billion), buffalo meat ($3.59 billion), spices ($3.31 billion) and non-Basmati rice ($3 billion).
Shroff too believes that agriculture had unlimited potential for export. “But there are too many hurdles,” he adds. “If the rules are changed and hurdles are removed and export is simplified, then we have a very high potential of agriculture export because we are today self-sufficient,” he argues. “I am hoping the government will ensure that the Budget is planned in a way so that farmers benefit, as do allied industry,” says Shroff.
Two years away from the 2022 target date for doubling farmers’ incomes, 2020 may find renewed focus on the vision. Policy measures may, therefore, revolve around it, with efforts to improve commercially viable crops.
Incidentally, India is among the top ten producers of horticultural produce. The country is the second highest vegetable producer in the world, with an annual output of 182.034 million tonnes. India is the topmost producer of Okra (Lady’s fingers or bhindi) with an annual output of 6.073 million tonnes. Maintaining the lead in greens may just be among the priorities of policymakers.